What to expect from Yahoo’s earnings

NEW YORK (MarketWatch) — Yahoo Inc. is scheduled to report its fourth quarter results after the market closes on Tuesday.

The Internet company
US:YHOO
has been through a year of change, as Chief Executive Marissa Mayer recently sought to reorganize management, partnered the company with web-browser company Mozilla and acquired video advertising service BrightRoll to boost growth in new fields.

While exploring new areas, the company has been benefitting from large stakes in Chinese e-commerce giant Alibaba Group Holding Limited
BABA, +2.77%
which is scheduled to report earnings Thursday, and Yahoo Japan. But some analysts feel its core business is lacking.

“The value of the core business is negligible compared to its Asian investments and balance sheet,” said Rob Sanderson of MKM Partners LLC.

Here’s what to expect from Yahoo’s fourth-quarter results:

Earnings: Analysts are expecting earnings per share, on average, of $0.29, down from 46 cents a year ago, according to FactSet. The estimate has declined from expectations of 33 cents as of the end of September.

Revenue: The FactSet consensus is total revenue of $1.19 billion, roughly in line with last year, with $463.3 million coming from Yahoo’s display business and $477.3 from search.

Stock reaction: Yahoo’s stock has gained 32% over the past 12 months, but has declined 7.9% since closing at a 14-year high of $52.37 on Nov. 17, 2014. Over the same time, the S&P 500 has advanced 14% and slipped 0.6%, respectively.

The average rating on Yahoo’s stock, of the analysts surveyed by FactSet is overweight. The average price target is $53.40, which is 9.7% above current levels.

What to watch for: Yahoo still owns 384 million shares of Alibaba, which is currently valued at $40 billion, but the shares are in IPO lockup until Sept. 21, 2015. It also owns 20 million shares of Yahoo Japan, which analysts say is valued at $7 billion. Yahoo has said it will give investors details of a tax-efficient structure to maximize its profits.

Analyst Sameet Sinha at B. Riley said the company is also likely to discuss its plans for the monetization of its Yahoo Japan holdings and growth in new businesses like mobile, video and social.

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